Ignoring Costs Associated with New Issues, What Is the Cost

question 18

Multiple Choice

Ignoring costs associated with new issues, what is the cost of retained earnings the same as?

• A) The cost of debt, as creditors have first call on retained earnings at the company's termination.
• B) The weighted average cost of all the company's sources of capital as the company is indifferent as to the use of retained earnings or other sources.
• C) The return on total assets as this ratio is equal to the sum of retained earnings plus dividends divided by total assets.
• D) The cost of shares as retained earnings represent the undistributed profits belonging to the common shareholders.
• E) The return on capital employed as retained earnings represents the opportunity cost of investment.

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Definitions:

Manipulation and Transfer

Techniques used in research or applied contexts to explore the causality of variables or to apply knowledge or skills learned in one context to another.

General Cognition

The overall process of thought that includes perception, memory, judgment, and reasoning.

Organisational Psychology

A field of psychology that studies human behavior in workplace settings and applies psychological principles to organizational challenges.

Implicit Personality Theory

A psychological concept suggesting that individuals use a set of assumptions to make inferences about the personalities of others based on limited observable traits.